3. At the end of Year 1, the company's board of directors set a target...
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3. At the end of Year 1, the company's board of directors set a target for Year 2 of net operating incom of $500,000 under absorption costing. If this target is met, a hefty bonus would be paid to the CEC of the company. Keeping everything else the same from part (2) above, change the units produce in Year 2 to 50,000 units. Would this change result in a bonus being paid to the CEO? Do you thin this change would be in the best interests of the company? What is likely to happen in Year 3 to th absorption costing net operating income if sales remain constant at 12,000 units per year?
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